Amanda purchased a home for $860,000 in year 1. She paid $172,000 cash and borro

Question

Amanda purchased a home for $860,000 in year 1. She paid $172,000 cash and borrowed the remaining $688,000. This is Amanda's only residence. Assume that in year 10 when the home had appreciated to $1,290,000 and the remaining mortgage was $516,000, interest rates declined and Amanda refinanced her home. She borrowed $860,000 at the time of the refinancing, paid off the first mortgage, and used the remainder for purposes unrelated to the home. What is her total amount of qualifying home-related debt for tax purposes?

$516,000.

$602,000.

$860,000.

$946,000.

Explanation / Answer

The qualifying home related debt will only be the amount paid towards the purpose of repaying the home loan. Hence, the total qualifying amount will be $ 516,000.

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